By Frederick Fabian, Claris Parenti, Maddy Taylor & Valerio Micale

Unlike other institutional investors, which often focus on short-term performance, pension providers have a fiduciary duty to address long-term systemic issues and act in their beneficiaries’ best interests. In many jurisdictions, this obligation includes setting credible climate targets, implementing internal changes to strategy, governance, and process, and actively supporting the decarbonization of the real economy.

Pension funds’ role in financing the climate transition is drawing sharper focus as the limits of public finance become clearer amid volatile markets, fiscal constraints, and rising climate risks. At the same time, sustainability disclosure rules and fiduciary standards are evolving across jurisdictions, creating both opportunities and uncertainty for long-term investors.

To reach their full potential for climate action, pension funds need support to overcome policy fragmentation, which continues to hinder their progress. Weak regulatory frameworks that prioritize short-term financial returns at the expense of long-term interest make it difficult for funds to integrate climate objectives into their own investment strategies and mandates with external managers.

This report presents an analysis of data from Climate Policy Initiative’s Net Zero Finance Tracker (NZFT) to explore the progress for the climate transition of 594 pension funds based in OECD countries, together representing USD 22.5 trillion in assets managed or owned. The report charts these funds’ progress across the three dimensions of Targets, Implementation, and Impacts to identify where pension funds are making meaningful progress and where further action is needed.

Get the report here